Business and Tax Updates August 2023: IBBZ Accounting

Summary:

As we embark on the journey through the second half of the year, we want to take a moment to express our heartfelt gratitude to you, our valued clients. Your trust in IBBZ Accounting as your financial partner is what propels us forward, and we are honored to have the privilege of supporting your business's financial success. At IBBZ Accounting, we believe in the power of personalized solutions that drive your business forward. We take immense pride in working alongside our clients. Without further ado, let's delve into the key highlights of this month. 

The Employment Agreement Builder 

Hiring staff can be a time-consuming task from the interview process down to all the paperwork. Business NZ’s Employment Agreement Builder is a tool that can help make this process more efficient by helping you with he admin work. The tool can help create employment agreements tailored to your business needs for each employee.

It includes:

• what you must do by law

• common mistakes made by employers and how to avoid them

• tips to help you decide what to put in your agreement — and what not to put in.

• the completed agreement in your inbox

• a sample offer letter

 
Updates to rates for UOMI and FBT on low-interest loans

Two Orders in Council have been made updating the rates for use of money interest and the rate for calculating fringe benefit tax on employer-provided, low interest loans.

The new underpayment rate for use of money interest is 10.91% (previously 10.39%). The new overpayment rate is 4.67% (previously 3.53%). These will apply on and after 29 August 2023.

The new prescribed rate of 8.41% (previously 7.89%) for calculating fringe benefit tax on employer-provided loans applies for the quarter beginning 1 October 2023 and subsequent quarters.

The importance of Budgeting and Forecasting

Budgeting and forecasting are valuable tools that you can use to assess and evaluate your business’s current performance as well as how the business is projected to perform into the future.

Budgeting involves creating a detailed plan for how the business will allocate its financial resources, taking into account expenses, revenue projections, and other financial goals. By setting a budget, you can gain better control over their finances, make informed decisions, and prioritize spending.

Forecasting, on the other hand, involves predicting future financial outcomes based on historical data and market trends. This helps owners anticipate potential challenges and opportunities, enabling them to make proactive adjustments to their operations and strategies. By combining budgeting and forecasting, you can develop a comprehensive financial roadmap that guides their decision-making and increases the likelihood of achieving their business objectives.

Business Updates 

1. On 16 August, the monetary Policy Committee announced that the official cash rate will remain at 5.5% and inflation also remains at 6%. Inflation and the cost-of-living crisis continues to be a concern for most kiwis.

2. Retail businesses can now apply for up to 50% co-funding to upgrade hot water heating. If your business uses hot water for day-to-day operations, you can apply for the programme which assists with co-funding for hot water heat pumps used in commercial buildings for

   • heating water, such as for kitchens or showers 

   • heating spaces of all types, such as workplaces to indoor cropping

   • combined space and water heating (as above)

3. The unemployment rate is currently at 3.6%, a 0.2% increase from the last quarter and will next be updated in November.

Tax Updates 

1. The IRD has issued an exposure draft which discusses when gifts become assessable income. It is currently up for discussion and comment. It states that a fist may be assessable income if it is derived:

   • In connection with employment

   •  From a business or profit-making activity

   • In undertaking a voluntary activity (and is not a reimbursement of expenditure)

   • As income under ordinary concepts

2. The IRD has released a draft Interpretation Statement which updates and replaces IS 18/01. The statement acts as a guide highlighting compliance obligation as well as how income derived by trustees and beneficiaries is taxed. The major changes are due to legislative amendments to the trust rules since IS 18/01 was published and the majority remains unchanged.

3. The IRD has also issued an interpretation statement regarding Group GST registration. This includes guidance on who is eligible to form a group and the types of groups possible. Two or more companies are eligible to be a GST group if they:

   • Are a group of companies

   •  Are part of a group of companies

   • Would be a group of companies but one or more of the companies is a multi-rate portfolio investment entity (PIE) or a look-through company; or

   • Would be a group of companies but one or more of the companies is a listed PIE (s 55(1)(a)).